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Cash Flow Preparation

27. Prepare a statement of cash flows for the Crosby Corporation. Follow the general procedures indicated in Table 2-10 on page 38.

Crosby CorporationStatement of Cash FlowsFor the Year Ended December 31,2009 |

Cash Flows from operating activities: |

Net Income (earnings after taxes) | | $160,000 |

Adjustments to determine cash flow from operating activities: | | 160,000+50,000-50,000-20,000+20,000+190,000-20,000330,000 Net Cash flows-160,000 Net Income170,000 Total Adj. |

Add back depreciation | $50,000 | |

Increase in accounts receivable | ($50,000) | |

Increase in inventory | ($20,000) | |

Decrease in prepaid expenses | $20,000 | |

Increase in accounts payable | $190,000 | |

Decrease in accrued expenses | ($20,000) | |

Total adjustments | | $170,000 |

Net cash flows from operating activities | | $330,000 |

Cash Flows from investing activities: |

Decrease in investments (long-term securities) | $10,000 | $10,000-400,000-390,000 Net cash flows |

Increase in plant and equipment | ($400,000) | |

Net cash flows from investing activities | | ($390,000) |

Cash Flows from financing activities: |

Increase in bonds payable | $100,000 | $100,000-10,000-50,000-40,000 Net cash flows |

Preferred stock dividends paid | (10,000) | |

Common stock dividends paid | (50,000) | |

Net cash flows from financing activities | | (40,000) |

| | $330,000 Net Cash flows-390,000 Net cash flows-40,000 Net cash flows -100,000 Net Decrease in cash flows |

Net decrease in cash flows | | ($100,000) |

Note: Figures are derived from taking the difference from the year-end 2007 figures and the year-end 2008 listed on the Comparative Balance Sheet, and from the Income statement as well as from the statement of retained earnings.

28. Describe the general relationship between net income and net cash flows from operating activities for the firm?